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ACCA report into the challenges of providing independent assurance over an integrated report

  • ACCA (UK Association of Chartered Certified Accountants) (lt green) Image

20 Nov 2015

The Association of Chartered Certified Accountants (ACCA) has published a report into what it sees as the challenges to providing independent assurance over an integrated report. The report concludes that the absence of suitable criteria upon which to audit the integrated report against is “the most significant obstacle to assurance over the integrated report, more so than the risk of auditor liability”.

The report The Challenges of Assuring Integrated Reports: Views from the South African Auditing Community focuses on the issue of independent assurance over an integrated report.  It looks at whether an integrated report can, and should, be subject to independent assurance in the same way that such assurance is provided on annual reports and financial statements.  Views are obtained from a number of senior assurance practitioners from South Africa where all listed companies must prepare an integrated report.  It highlights that although there is support for independent assurance over an integrated report, there are a number of technical and legal challenges that need to be overcome.

The report indicates that assurance over an integrated report has the potential to add value to the by improving the report’s credibility. 

However a number of technical challenges including the difficulty of developing suitable criteria for assuring the integrated report, the limited range of skills of a traditional audit team and the adequacy of a client’s records, systems and controls “make it impossible to assure the entire integrated report”.  As a result, the report concludes that “only certain parts of the integrated reports can, currently, be the subject of an assurance engagement”. 

The ACCA sees that assurance could be provided over those parts of the report that provide factual disclosures but “information that is abstract, interpretative predictive or qualitative is too subjective to be the subject of a limited or reasonable assurance engagement”. 

The ACCA also warns that even if suitable criteria can be developed to audit against, this could have the unintended consequence “of limiting the relevance of information included in integrated reports as companies limit disclosures to only those which can be objectively verified”.

The report makes a number of recommendations:

  • In the short term, develop a set of guidelines which recommend those parts of the integrated report that should be the subject of an assurance engagement and offer a basis for describing how assurance is provided over the material components of the integrated report.
  • In the long run, possibly develop an alternative assurance model which does not express an opinion on the extent to which the integrated report complies with the International Integrated Reporting Council (IIRC) Framework but instead provides something similar to a panel review by suitably qualified experts.  The ACCA highlight that there is a risk that this new level assurance “will fail to command the same respect as the audit of financial statements and will simply expand or perpetuate the audit expectation gap”.
  • Before the creation of such an assurance model, companies should actually engage with stakeholders to determine the extent of demand for such assurance.

The press release and full report are available on the ACCA website.

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